Gaming Commission Argues for Regulation of Daily Fantasy Sports

Written by Zachary Halperin

Zachary Halperin
BU News Service

The Massachusetts Gaming Commission argued that the growing daily fantasy sports (DFS) industry should be regulated, the Commissioners said at a public meeting at Hynes Convention Center on Thursday, October 29.

The central questions raised by the Commission revolves around the categorization of daily fantasy as gambling or as a game of skill.

“I think there’s enough similarity to other forms of gambling,” Enrique Zuniga,  Commissioner on the panel, said. “Why treat it differently and not regulate?”

In daily fantasy sports, a consumer drafts a team of professional sports players and is awarded points based on how well their players perform. Teams compete for various prizes, most often cash on popular sites such as Boston-based DraftKings and New York-based FanDuel.

Oct. 29- A DraftKings advertisement outside the Hynes Convention Center.

A DraftKings advertisement outside the Hynes Convention Center.

Earlier forms of fantasy sports were only season-long; you drafted a team and you stuck with it for the entire season (of course, you could trade players if another owner agreed though). The allure of daily fantasy is that if you lose, you can play again tomorrow.

Zuniga compared daily fantasy to traditional gambling, like betting on professional or collegiate sports games. Just like how Vegas sports books draw point spreads (the projected amount a team will win by) on NFL games, someone is drawing a line on how much a certain player is worth in DFS, Zuniga said.

“Somebody’s saying, or making a judgment call, that Tom Brady’s going to be worth more than Tony Romo,” Zuniga said.

Commissioner Gayle Cameron, who has worked undercover investigating criminal casino operations in New Jersey, also argued in favor of regulating daily fantasy. She attended a recent International Association of Gambling Regulators Conference, she said, where, “the consensus from regulators around the world is that [DFS] should be regulated.”

Cameron voiced several specific concerns with the current structure of the DFS industry. Without an exterior body to govern the industry, the credibility and integrity of sites like DraftKings and FanDuel are in question, she said.

“Do you have a better deal if you bet early?” Cameron asked. “Can the outcome be altered? Where is the money coming from and going to?”

She also said problem gaming is a major issue within the current structure. The highest risk for gambling addiction is the young, male demographic, she said, and these are who daily fantasy sites target with their aggressive advertising campaign. DraftKings and FanDuel spent a combined $107 million on advertising in the month of September, according to iSpot.tv.

“I’ve spent a good deal of my career in New Jersey dealing with illegal sports betting, and I’ve seen the harm,” Cameron said.

But, as Chair of the Commission Stephen Crosby said, the Massachusetts Gaming Commission can not legislate or make decisions on policy questions. The Commission’s goal is to suggest to policy makers what sorts of regulation or licensing should be put in place. In the end, these decisions are left up to the attorney general or governor, he said.

The problem is that it’s hard to figure out where DFS fits into Massachusetts Law, Commission Staff Attorney Justin Stempeck said.

“That’s why legislature needs to make a decision on should [DFS] be legal or not,” Crosby said.

According to Massachusetts law, a “banking or percentage game played with cards, dice, tiles or dominoes, or an electronic, electrical or mechanical device or machine for money, property, checks, credit or any representative of value,” constitutes illegal gaming. Daily fantasy’s legality comes into question with this definition, as it is a percentage game. But it also includes element of skill.

The aspects constituting skill in daily fantasy sports are still somewhat misunderstood. It’s not just about picking players that will perform well. It’s also about picking players who are not being rostered by a high percentage of your competitors.

Zuniga also compared DFS to poker, which is illegal online in the state of Massachusetts. In poker, the cards you are dealt is all chance. But there is also skill involved, such as bluffing, reading other people, and knowing odds, Zuniga said.

This is similar to daily fantasy sports- as there is skill in picking certain players for your roster- but there is chance on how those players will perform in any specific game.

Commissioner James McHugh said regulators need to ensure fairness, revenue streams and consumer confidence in the industry.

“You need to have somebody watching carefully when big sums of money are being transferred from one person to another,” McHugh said. “It’s no different from SEC [Security Exchange Commission] rules, or New York Stock Commission rules.”

Concerns about possible insider trading has led the industry to police itself, barring employees from competing on similar sites. DraftKings added that “an employee or operator of any daily fantasy site” may not compete in their contests on their Terms of Use.

“If the people making the lines are also allowed to gamble elsewhere, then maybe it’s not as fair,” Zuniga said.

In a statement after the Commission’s meeting on Oct. 29, DraftKings CEO Jason Robins said, “We are committed to working with all relevant government authorities to ensure that the industry operates in a manner that is completely transparent and fair for all consumers.”

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